Wanna see something REALLY scarry? If you think things are dicey regarding the economy this week, imagine working in the auto industry. Unless your company’s product burns rice for fuel, before the economic meltdown, you were likely in bad shape, financially. Since the meltdown, your company is basically Dead Corporation Walking. Double that, if you’re one of the Big Three automakers.
Lo, how the mighty have fallen.
At one time (say, circa 1960), GM, Ford, and Chrysler were the crown jewels of American manufacturing. Those three companies were the envy of the world. Americans made things. We built cars that were not just transportation – nay, they were objects of desire, status symbols, and tangible proof that the U.S. of A. was the Greatest Nation on Earth. But the times, they are a-changin.’
This week past, General Motors, Ford, and the Canadian Club they call Chrysler went to the Hill to beg for their pound of flesh in the part of an economic bailout. They, of course, represent not just American-made cars, but American jobs. Union jobs, for the most part. They did their best to put a great big “if you don’t help us our employees are gonna vote for somebody else” gun to their heads. Realistically, it’s not that this particular threat has any teeth. With no flour left in the barrel and Uncle Sam giving out I.O.U.s in lieu of cash, it wouldn’t really matter how loud anybody howls. But this is the New! Improved! Federal Government, now with MagiCa$h! (Need a loan? We’ll just print up some more bills…how would you like that – in thousand dollar bills? Ten-thousand dollar bills? How’s about we just wire the ‘money’ to your off-shore account?)
Even worse, GM and Chrysler floated a trial balloon this week, regarding a merger. Wow. Let’s see…neither company is making money. In fact, they’re both losing money faster than the government can print it (which is saying something). So merging would…um…hang on…oh, yeah. Make it easier for both companies to go down in flames. Good plan, that.
Lest you think I’m not a fan of American manufacturing, and in the interest of full disclosure, I Buy American. In fact, Mrs. Digital and I both drive Jeeps – I roll in a Wrangler, and she drives a Liberty. I’m a huge fan of Jeep, to the point where (if I had the money right now, I’d still get one) want a four-door Wrangler (Rubicon Unlimited) so bad I can taste it.
Also, keep in mind that the entire automotive biz is one big incestuous affair. GM, after all, sold a 51% controlling-interest stake in GMAC (their financial arm, and the only part of GM that HAD been a money-maker) to Cerebus…the self same company that bought a majority interest in Chrysler away from Mecedes. Merger discussions would be all but required in that situtaion. Stupid, but required.
So given the economic realities of things, is it possible to fix Detroit and restore it to it’s rightful place as the crown jewel of American manufacturing know-how?
Yep. It’s possible. But to paraphrase the “Michael Malone” character in An American Carol said, “I love the American Automobile Industry. That’s why we have to kill it – to save it from itself.”
No amount of bailout cash is gonna save these guys, because the ones they need saving from ARE themselves. Bloated product lines. Upside-down union contracts. Excessive manufacturing capacity. Poor design. Shoddy workmanship. To save the Big Three at this point bears no difference from the U.S.S.R. revealing their latest Five-Year Plan. What needs to happen is to allow these companies to go bankrupt, so they can reorganize, downsize, and save themselves. Here’s what I think needs to happen:
- Declare bankruptcy. This will give the companies some breathing room, and allow them to get out from under agreements that are choking them – like their bloated agreements with their unions.
- Ask the government not for bailout money for themselves, but for financial assistance in the interim for their suppliers. Otherwise, you’ve got some dominoes that will start falling, and that won’t be pretty.
- Shutter some factories to cut the excess manufacturing capacity. Lay off all non-essential personnel, cutting your workforce permanently, across the board – cut both white-collar and blue-collar jobs.
- Fire the management teams that got us here to begin with, and withhold their golden parachutes – no reason to reward those idiots for their incompetence. Tie executive pay to sales.
- Cut your dealer networks by one-third (at least), so the remaining dealers can make a buck and not have to deal with so many retail competitors.
- Reorganize the divisions, killing those that don’t have a future. In each division, kill product lines to get things down to a manageble number. For instance, GM has Chevy, Pontiac, Buick, Cadillac, Hummer, Saab, and GMC trucks. Toyota has Toyota, Lexus and Scion. In each division, GM has four or five times the number of models that Toyota has. Ask yourself, which company is healthier?
- Offer fewer options on each vehicle, thereby reducing the complexity of building each vehicle.
- Used the money you’ve freed-up to fund more R&D. Get the bean-counters out of the way, and start listening to your customers as to what they want.
- Weed out the ones in the company that are insisting on business as usual. Fire them. Reward and incentivize those that have creative solutions, and put the people that are willing to think outside the box, in charge.
- Batten down the hatches and make every effort to run “lean and mean” from here on out.